The impact of bank-specific, industry-specific and macroeconomic variables on the profitability of Jordanian commercial banks

This paper examines the main determinants of profitability in the Jordanian banking sector over the period 2010–2023. The study employs a panel dataset covering all Jordanian commercial banks to achieve its objectives. Return on assets and return on equity are used as the primary measures of profitability. The analysis considers both bank-specific and macroeconomic variables to evaluate their influence on profitability. The study provides evidence that capital adequacy has a significant positive impact on bank profitability, highlighting the critical role of solid capital buffers in enhancing financial performance and resilience. Larger banks with adequate liquidity exhibit higher profitability. The findings also indicate that a growing and stable economy positively influences bank profitability. During periods of instability, only a slight decrease in profitability is observed, which may be attributed to the strong measures implemented by the Central Bank of Jordan. These results carry important policy implications: policymakers are encouraged to maintain strong capital adequacy frameworks consistent with international standards, as these contribute to the stability outcomes identified in this study. The findings remain robust when evaluated using dynamic panel estimator models.